System and method for money management using a plurality of profit levels in an electronic trading environment

ABSTRACT

A system and method for money management in an electronic trading environment are presented. According to one embodiment, a money management application intercepts an order before the order is sent to an exchange, and determines a plurality of P/L levels, based on which the money management application then selects a set of money management parameters to be used to control or modify order parameters before the order is sent to the exchange. The plurality of profit levels may include a net profit level determined based on a trader&#39;s net position and a current market level, a realized profit level determined based on trader&#39;s sells and buys associated with the tradeable object, or an open profit level determined based on the realized and net profit levels. The set of money management parameters may include a maximum order quantity and a maximum net position so that, for example, if the order quantity associated with the order is higher than the maximum order quantity associated with the applicable set of money management parameters, the order quantity may be modified to the maximum order quantity.

CROSS REFERENCE TO RELATED APPLICATIONS

This application is a continuation U.S. patent application Ser. No.10/447,382, filed May 29, 2003, which is a continuation-in-part of U.S.patent application Ser. No. 10/355,471, filed on Jan. 31, 2003, entitled“System and Method for Money Management in Electronic TradingEnvironment,” the contents of which are fully incorporated herein byreference.

FIELD OF INVENTION

The present invention is directed towards electronic trading. Morespecifically, the present invention is directed to tools for controllingtrader's trading, assisting a trader in risk analysis, and makingprofitable trades in an electronic trading environment.

BACKGROUND

Trading methods have evolved from a manually intensive process to atechnology enabled, electronic platform. With the advent of electronictrading, a user or trader can be in virtually direct contact with themarket, from practically anywhere in the world, performing nearreal-time transactions, and without the need to make personal contactwith a broker.

Electronic trading is generally based on a host exchange, one or morecomputer networks, and client devices. In general, the host exchangeincludes one or more centralized computers to form the electronic heart.Its operations typically include order matching, maintaining order booksand positions, price information, and managing and updating a databasethat records such information. The host exchange is also equipped withan external interface that maintains uninterrupted contact to the clientdevices and possibly other trading-related systems.

Using client devices, market participants or traders link to the hostexchange through one or more networks. A network is a group of two ormore computers or devices linked together. There are many types of wiredand wireless networks such as local area networks and wide areanetworks. Networks can also be characterized by topology, protocol, andarchitecture. For example, some market participants may link to the hostthrough a direct connection such as a T1 or ISDN. Some participants maylink to the host exchange through direct connections and through othercommon network components such as high-speed servers, routers, andgateways. The Internet, a well-known collection of networks andgateways, can be used to establish a connection between the clientdevice and the host exchange. There are many different types of networksand combinations of network types known in the art that can link tradersto the host exchange.

Regardless of the way in which a connection is established, softwarerunning on the client devices allows market participants to log onto oneor more exchanges and participate in at least one market. A clientdevice is a computer such as a personal computer, laptop computer,hand-held computer, and so forth that has network access. In general,client devices run software that creates specialized interactive tradingscreens. Trading screens enable market participants to obtain marketquotes, monitor positions, and submit orders to the host.

Generally, when an order is submitted to a host exchange, the hostchecks the conditions associated with the order, for example price andquantity, and prioritizes the order with other orders of the same price.When the order conditions are satisfied in the market, a trade occursand trade information is then relayed in some fashion to one or moreclient devices. In fact, the host exchanges typically publish a datafeed to the client devices so that the traders can have access to themost current market information.

Market information commonly includes information regarding the insidemarket and market depth. The inside market is the lowest sell price inthe market and the highest buy price in the market at a particular pointin time. Market depth refers to quantities available at the insidemarket and may also refer to quantities available at other prices awayfrom the inside market. The quantity available at a given price level isusually provided by the host exchange in aggregate sums. In other words,a host exchange usually provides the total buy or the total sellquantity available in the market at a particular price level in its datafeed. The extent of the market depth available to a trader usuallydepends on the host exchange. For instance, some host exchanges providemarket depth for all price levels, while some provide only quantitiesassociated with the inside market, and others may provide no marketdepth at all. Additionally, host exchanges can offer other types ofmarket information such as the last traded price (LTP), the last tradedquantity (LTQ), and order fill information.

To profit in electronic markets, market participants must be able toassimilate large amounts of data, including market information providedby an exchange, and, accordingly, react quicker than other competingmarket participants to take advantage of profitable market conditions.Further, because electronic trading offers tools that enable traders toreact to the market so much faster than in the traditional pitenvironment, a trader risks and may lose a lot of money so much quicker.It is therefore desirable to offer tools that can assist a marketparticipant in adapting his or her trading strategy to an electronicmarketplace, help the participant to make desirable trades, as well asprovide means for money management and risk analysis.

BRIEF DESCRIPTION OF THE DRAWINGS

Example embodiments of the present invention are described herein withreference to the following drawings, in which:

FIG. 1 is an example network configuration for a communication systemutilized to access one or more exchanges;

FIG. 2 is a block diagram illustrating an example money managementmodule according to one embodiment;

FIG. 3 is a flow chart illustrating an example method for moneymanagement in an electronic trading environment according to oneembodiment;

FIG. 4 is a block diagram illustrating an example graphical interfacefor displaying profit/loss (“P/L”) information related to a tradeableobject;

FIG. 5 is a block diagram illustrating an example graphical interfacefor displaying P/L indicators for working orders associated with atradeable object;

FIG. 6 is a block diagram illustrating an example graphical interfacefor displaying P/L levels for a plurality of working orders that atrader may enter to exit the trader's position;

FIG. 7 illustrates one example embodiment for displaying a plurality ofworking order indicators in combination with a Net P/L indicator and aRealized P/L indicator.

FIG. 8 is a block diagram illustrating an example graphical interfacefor displaying a plurality of potential profit levels determined basedon potential market movements;

FIG. 9 is a block diagram illustrating an example money managementinterface for defining filter criteria and filter conditions;

FIG. 10 is a block diagram illustrating an example monitoring interfacethat allows a trader to view market conditions and limitations imposedon each tradeable object or a group of the tradeable objects associatedwith the created filters;

FIG. 11 is a block diagram illustrating an example graphical interfacefor displaying trader related P/L information and money managementfilter related data; and

FIG. 12 is a block diagram illustrating an example graphical interfaceusing which a trader can configure a plurality of filters for each P/Ltrigger level;

FIG. 13 is a block diagram illustrating an example graphical interfacefor displaying a money management filter band in combination with P/Lindicators and time-based filter indicators.

FIG. 14 is a block diagram illustrating an example graphical interfacethat may be used for verifying and changing filter conditions configuredby a trader or a system administrator based on a plurality of drop offloss conditions; and

FIG. 15 is a block diagram illustrating an example interface thatdisplays potential profit drop off indicators in relation to a trader'srealized profit indicator.

DETAILED DESCRIPTION

I. Money Management Overview

The present invention provides a system that preferably operates as amoney management tool by dynamically modifying an order parameter suchas an order quantity to prevent or reduce losses or increase trader'sprofits. That is, it preferably operates as a trader's conscience or anautomatic trading tool that prevents a trader from losing money byrestricting certain orders from being sent to the exchange and/or bymodifying the orders before they are sent to the exchange. By reducingpotential losses that might have been caused by such unchanged orders, atrader or trading house can benefit with increased profits.Additionally, the system can be programmed to dynamically loosen therestrictions set on certain orders when the trader or automatic tradingtool is making money. Advantages, including those described directlyabove, will become readily apparent to one skilled in the art uponreading the description herein.

Generally, according to a preferred embodiment, a trader or someautomatic trading tool sends an order to buy or sell a tradeable objectto an exchange. Preferably, the system intercepts the order and attemptsto match it to one or more specific filters, which have been set by atrader or system administrator. The one or more filters may be based ona plurality of filter criteria such as dynamically computed trader's P/Llevels. In one embodiment, a filter criterion may be based on arealized, net, or open P/L level, the embodiments of which will bedescribed below. When a trader enters an order, and one of the trader'sP/L levels matches one of the filters, a filter condition correspondingto that filter is applied to the order. The order can match one or morefilters, and if there is a conflict between the filters, the mostconservative condition may control. This preferred process may result insending a modified order to the exchange, preventing the order fromreaching the exchange, or sending the order to the exchange without anymodifications, the embodiments of which will be described further below.

II. Hardware and Software Overview

FIG. 1 is a block diagram that illustrates an electronic trading system100 in accordance with the preferred embodiments. The system 100includes one or more exchanges 102, 104, 106 and one or more clientdevices 108, 110, 112. Intermediate devices such as gateways 114, 116,118, routers, and other such types of client devices may be used toconnect network 120 to networks 122, 124, 126 so that client devices108, 110 and 112 and exchanges 102, 104, and 106 can communicate marketinformation. It should be understood that the present invention is notlimited to any particular system configuration. For example, networks122, 124, and 126, or client devices 108, 110, 112 could connectseparately to gateways 114, 116, 118. Of course, there are many othersystem configurations on which the preferred embodiments may beimplemented.

A. Host Exchange

Host exchanges 102, 104, and 106 may represent electronic exchanges suchas, for example, the London International Financial Futures and OptionsExchange (“LIFFE”), the Chicago Board of Trade (“CBOT”), the New YorkStock Exchange (“NYSE”), the Chicago Mercantile Exchange (“CME”), theGerman stock exchange-Exchange Electronic Trading (“Xetra”), or theEuropean Exchange (“Eurex”), or any other exchange, which may includebasic to more complex systems that automatically and electronicallymatch incoming orders. These example exchanges and other exchanges arewell known in the art. Communication protocols required for connectivityto one of these exchanges are also well known in the art.

Exchanges 102, 104, 106 allow traders to log onto a market to tradetradeable objects. As used herein, the term “tradeable objects,” referssimply to anything that can be traded with a quantity and/or price. Itincludes, but is not limited to, all types of tradeable objects such asfinancial products, which can include, for example, stocks, options,bonds, futures, currency, and warrants, as well as funds, derivativesand metals. The tradeable object may be “real,” such as products thatare listed by an exchange for trading, or “synthetic,” such as acombination of real products that is created by the user. A tradeableobject could actually be a combination of other tradeable objects, suchas a class of tradeable objects.

An exchange 102, 104, 106 can implement numerous types of orderexecution algorithms, and sometimes the type of algorithm depends on thetradeable object being traded. The preferred embodiments may be adaptedby one skilled in the art of work with any particular order executionalgorithm. Some example order execution algorithms includefirst-in-first-out and pro rata algorithms. The first-in-first-out(FIFO) algorithm, used for some markets listed with Eurex for example,gives priority to the first person to place an order. The pro rataalgorithm, used for some markets listed with LIFFE for example, splitsall orders for the same price. The present invention is not limited toany particular type of order execution algorithm.

Regardless of the type of order execution algorithm used, each exchange102, 104, and 106 preferably provides similar types of information tosubscribing devices 108, 110, and 112. Market information may includedata that represents the inside market, which is the lowest sell price(best ask) and the highest buy price (best bid) at a particular point intime. Market information may also include market depth. Market depthrefers to quantities available at the inside market and can also referto quantities available at other prices away from the inside market. Thequantity available at a given price level is usually provided by thehost exchange in aggregate sums. In other words, the exchange usuallyprovides the total buy quantity and the total sell quantity available inthe market at a particular price level in its data feed. The extent ofthe market depth available to a trader usually depends on the exchange.For instance, some exchanges provide market depth for all (or most)price levels, while some provide only quantities associated with theinside market, and others may provide no market depth at all.Additionally, the exchanges 102, 104, 106 can offer other types ofmarket information such as the last traded price (LTP), the last tradedquantity (LTQ), and order fill information.

B. Gateway

Gateways 114, 116, 118 are devices such as a mainframe,superminicomputer, minicomputer workstation, microcomputer that connectnetwork 120 to networks 122, 124, 126 so that market information can besuccessfully passed between client devices 108, 110, 112 and exchanges102, 104, 106. Gateways 114, 116, 118 preferably receive marketinformation from the exchanges 102, 104, and 106 and convert it to aformat compatible with the protocols used by the client devices 108,110, 112 using conversion techniques known in the art. Also, as known bythose skilled in the art, gateways 114, 116, 118 may have one or moreservers to support data feeds, such as a price server for processingprice information, an order server for processing order information, anda fill server for processing fill information. A trader at one of theclient devices 108, 110, 112 can subscribe to price information, orderinformation, and fill information for a particular market hosted at theexchanges 102, 104, and 106. The gateways 114, 116, and 118 alsopreferably receive transaction information, such as orders, orderchanges, queries, etc., from the client devices 108, 110, and 112 andforward that information to corresponding exchanges 102, 104, and 106.

B. Client Device

The client devices 108, 110, and 112 are devices that provide aninterface for traders to trade at one or more markets listed with one,some, or all of the exchanges 102, 104, and 106. Some examples of clientdevices include a personal computer, laptop computer, handheld computer,and so forth. The client devices 108, 110, and 112, according to onepreferred embodiment, include at least a processor and memory. Theprocessor and memory, both well known computer components, are not shownin FIG. 1 for sake of clarity. Preferably, the processor has enoughprocessing power to handle and process various types of marketinformation. It should be understood that more market information isreceived and processed, the more processing power is preferred. However,any present day processor has enough capability to perform at least themost basic part of the present invention.

Memory may include a computer readable medium. The term computerreadable medium, as used herein, refers to any medium that participatesin providing instructions to processor for execution. Such a medium maytake many forms, including but not limited to, non-volatile media, andtransmission media. Non-volatile media includes, for example, optical ormagnetic disks, such as a storage device. Volatile media include dynamicmemory, such as main memory or random access memory (“RAM”). Commonforms of computer-readable media include, for example, a floppy disk, aflexible disk, a hard disk, a magnetic tape, or any other magneticmedium, a CD-ROM, any optical medium, punch cards, paper tape, any otherphysical medium with patterns of holes, a RAM, a PROM, and EPROM, aFLASH-EPROM, and any other memory chip or cartridge, or any other mediumfrom which a computer can read.

The client devices 108, 110, and 112 receive market information from anyof the exchanges 102, 104, and 106. According to the preferredembodiments, market information is displayed to the trader(s) on thevisual output device or display device of the client devices 108, 110,and 112. The output device can be any type of display. For example, thedisplay could be a CRT-based video display, an LCD-based or a gasplasma-based flat-panel display, a display that shows three-dimensionalimages, or some other display type. The present invention is not limitedto any particular type of display.

Upon viewing the market information or a portion thereof, a trader maywish to send orders to an exchange, cancel orders in a market, query anexchange, and so on. To do so, the trader may input various commands orsignals into the client devices 108, 110, and 112, for example, bytyping into a keyboard, inputting commands through a mouse, or inputtingcommands or signals through some other input devices. Upon receiving oneor more commands or signals, the client devices 108, 110, and 112preferably generate transaction information. For instance, a trader mayclick a mouse button to initiate an order to buy a tradeable object.Then, transaction information would include an order to buy a particularquantity of the tradeable object at a particular price. There are manydifferent types of messages and/or order types that can be submitted,all of which may be considered various types of transaction information.Once generated, transaction information is sent from the client devices108, 110, and 112 to the host exchange 102, for example, over thenetworks 120, 122, 124, and 126.

III. Money Management and Profit-Related Information

FIG. 2 shows an example overview of the money management application200, referred hereinafter interchangeably as a money management module.The money management module 200 may be implemented on any type ofcomputing device. In the preferred embodiment, the money managementmodule 200 is implemented on a client device. Alternatively, the moneymanagement module 200 may be implemented on any type of computing devicesuch as a gateway, for example.

The money management module 200 preferably includes one or more filters202. Each filter is made up of certain filter criteria that ispreferably set by an individual, such as by a trader himself or by anadministrator. For example, the filter criteria may include criteriathat are based on the order itself, such as the name of an exchange, atradeable object, a type of order, e.g., whether the order is a buy or asell, a range of price levels, or a range of quantities. Additionally,the filter criteria may include criteria that are based on factors otherthan those related to the order, such as, for example, trader's profitand loss (“P/L”) information, last traded price, last traded quantity,theoretical values, or other variables. In such an embodiment, the moneymanagement application 200 may determine filter criteria dynamicallybased on trader-related data or order data, e.g., order data being sentfrom a client device to an exchange, or based on order-related data thatis received from the exchange in a data feed, data from any outsidesources such as employment numbers or interest rates, or any data comingfrom an exchange such as price information, for example. Dynamic filtercriteria may include a trader's net position, profit levels, a totalworking buy/sell quantity, a total filled buy/sell quantity, or any datathat is received from the exchange or outside sources such as any news.Further, the filter criteria may be time-based so that time-basedfilters may be used in combination with another set of filterconditions. In such an embodiment, if more than one filter applies tothe order, the most conservative filter conditions will control orderparameters. Alternatively, the time-based filter may suppress otherfilters for the time period associated with the filter.

As will be described in greater detail below, filter criteria may bebased on different types of P/L levels including an open, net, orrealized P/L level. Further, for example, filter criteria may be basedon any user-configurable equations that may include a plurality ofuser-configurable factors that are based on data available from anexchange or other sources. It should be understood that many otherfilter criteria are possible as well, and filter criteria may be userconfigurable.

According to an example embodiment, each filter is associated with oneor more filter conditions that may be applied to an incoming order ifthe order matches the filter criteria. This process, as will bedescribed in greater detail below, may result in sending a modifiedorder to an exchange. For example, a certain condition associated with afilter, when applied to the order, may result in modifying one or moreorder parameters, such as increasing or decreasing order quantity.Alternatively, an application of a certain filter condition may resultin preventing the order from reaching the exchange. Further,alternatively, a filter condition may result in sending the order to theexchange without modifying any of the order parameters.

It should be understood that the money management module 200 may enablea trader or a risk administrator to configure filters as well as anyfilter conditions for each filter via a graphical user interface, theembodiments of which will be discussed in greater detail below. In suchan embodiment, the graphical user interface may provide a trader with alist of filters so that when a trader selects one of the filters fromthe list, a second graphical user interface may be displayed, via whichthe trader may define any desired filter conditions for that filter.Alternatively, a single interface may be used to enable a trader toselect any desired filters and define filter conditions. Further,alternatively, a trader may define filters and/or filter conditionsusing a spreadsheet application that may be linked to the graphical userinterface or money management module 200. In such an embodiment, forexample, a filter condition may be in a format of an equation, and atrader may enter the equation or change any variables in the equationusing the spreadsheet.

When a trader uses a spreadsheet, it should be understood that anydesirable data exchange protocol could be used to embed information fromthe third party software to the money management module 200 or to thegraphical user interface that is used to define filters and filterconditions. For example, when the Microsoft Windows is used as the thirdparty software, Microsoft OLE 2.0 may be used to perform thesefunctions. In such an embodiment, Microsoft OLE 2.0 may be used toprovide a link between any filter condition and a cell from a MicrosoftEXCEL spreadsheet. Data exchange protocols in general, and linking aswell as embedding techniques in particular, are well known to thoseskilled in the art. It should be understood that when an equation isused to define a filter condition, every time a value of one of theequation variables changes, the spreadsheet application or any otherthird party software may dynamically calculate a new value for thefilter condition associated with the equation. Thus, when an ordermatches a certain filter associated with such an equation, the moneymanagement module 200 may apply the most recently calculated filterconditions provided by the spreadsheet application, for example.

It should be understood that an individual trader can uniquely setfilters and filter conditions to suit his or her individual trading riskstrategies. In one embodiment, the trader could program the moneymanagement filters and conditions in a variety of ways and at any timesuch as before trading begins or on the fly. Alternatively, a systemadministrator who oversees a number of traders may set up a number offilters and filter conditions for a group of traders or for individualtraders, thus creating a money management program that controls tradesof the group of traders. Then, when a trader in that group inputs a neworder, the money management module 200 can execute the program byapplying the pre-configured filter criteria and filter conditions to theorder.

FIG. 3 is a flow chart illustrating an example method 300 for moneymanagement in an electronic trading environment. According to an exampleembodiment, the money management module 200 may perform the method 300.The example method 300 includes receiving an order at step 302, applyinga first filter at step 304, determining if the filter is applicable tothe order at step 306, then, if the filter is applicable, applyingconditions associated with the filter at step 308, and determining ifthere are any other filters to be applied to the order at step 310. Ifthere are any other applicable filters, the method 300 includesretrieving the next filter at step 314, and then repeating steps 304,306, 308, and 310 until there are no more filters that are applicable tothe order. If there are no more filters, the method 300 includes, atstep 312, processing the order based on the applied conditions.

At step 302, money management module 200 detects a new order beingplaced by a trader. It should be understood that a trader may input anew order using many different trading applications and interfaces. Inone embodiment, a trader may use a commercially available tradingapplication, X_TRADER® from Trading Technologies International, Inc. ofChicago, Ill., that allows the trader to trade in a system like the oneshown in FIG. 1. X_TRADER® also provides an electronic tradinginterface, referred to as MD Trader™, in which working orders and/or bidand ask quantities are displayed in association with a static axis ofprices. Portions of the X_TRADER® and the MD Trader™-style display aredescribed in U.S. patent application Ser. No. 09/590,692, entitled“Click Based Trading With Intuitive Grid Display of Market Depth,” filedon Jun. 9, 2000, U.S. patent application Ser. No. 09/971,087, entitled“Click Based Trading With Intuitive Grid Display of Market Depth andPrice Consolidation,” filed on Oct. 5, 2001, and U.S. application Ser.No. 10/125,894, entitled “Trading Tools for Electronic Trading,” filedon Apr. 19, 2002, the contents of which are incorporated herein byreference. Further, it should be understood that orders may be placedusing any automatic trading application as well.

However, the preferred embodiments are not limited to any particularproduct that allows a trader to input orders and trade in the systemlike the one shown in FIG. 1. Further, it should be understood that themoney management module 200 and a trading application may share commonlyused information so that, for example, the money management module 200may have access to any data provided via data feeds from an exchange,such as information related to any fills related to orders submitted bya particular trader, and also to any data entered by a trader via atrading application interface.

When the new order is detected, at step 304, the money management module200 may access a set of pre-configured filters and then may apply afirst filter to the order. It should be understood that a filter mayinclude one or more filter criteria, such as, for example, a trader'sidentifier, a name of a predetermined tradable object, a type of theorder, e.g., a buy or a sell, or any other trader-related filtercriteria such as criteria related to trader's performance, for example.Then, at step 306, the money management module 200 determines if one ormore criteria associated with the first filter apply to the receivedorder. It should be understood that a filter may include one or moreuser configurable criteria. If a filter includes a plurality of filtercriteria, the order preferably matches all identified filter criteriafor the filter to be applicable.

If the filter applies to the order, at step 308, the money managementmodule 200 applies one or more conditions associated with the filter tothe order parameters. For example, the application of a filter conditionto an order may result in decrementing or incrementing the quantityassociated with the order when the order is submitted to the exchange.If the money management module 200 determines that the first filter doesnot apply to the order, the method 300 continues at step 310, and themoney management module 200 determines if there are more filters to beapplied to the order. If there are any other filters, at step 314, themoney management module 200 selects a next filter from the list offilters, and the method 300 continues at steps 304, 306, 308, and 310.

It should be understood that if two or more filters are associated withthe same condition imposing different restrictions, such as, forexample, decreasing order quantities to two different values, the mostconservative (the lowest) order quantity associated with the filtercriteria could be used to modify the quantity in the original order.Alternatively, a trader or system administrator may configure filterconflict rules that may be used by the money management module 200 todetermine which filter condition, if any, should be applied to theorder.

Referring back to step 310, if there are no more filters applicable tothe order, at step 312, the money management module 200 appliesconditions imposed by the filter(s) to parameters associated with theorder. Once the money management module 200 applies the filters to theincoming order, the order may be sent to the exchange. As illustrated inFIG. 3, at block 312, sending the order to the exchange may involvesending the original order with no conditions, e.g., the original orderwith its non-modified order parameters, or sending the original orderwith conditions, e.g., the original order having one or more of itsorder parameters modified based on the conditions of the applicablefilter(s). Further, alternatively, the application of filter conditionsmay result in not sending the order to the exchange, e.g., effectivelypreventing the order from reaching the exchange. If the order isrejected because one of the money management filter conditions preventsthe order from being sent to the exchange, a message may be displayedfor a trader so that a trader is aware that the order was not sent tothe exchange. Alternatively, a message may also be displayed to inform atrader of any order modifications such as order quantity modifications,for example.

In addition to its money management functionality, the money managementmodule 200 may also determine and display to a trader via one or moregraphical interfaces, in combination with or separately from the moneymanagement filters, one or more P/L level indicators that may allow atrader to view his/her profit information at any time during a tradingday and that may assist a trader in making profitable trades. The nextfew figures, FIGS. 4, 5, 6, 7 and 8 illustrate example graphicalinterfaces that display profit related indicators associated with aplurality of profit levels. Then, FIGS. 9, 10 and 12 illustrate examplegraphical interfaces that enable a trader to configure and view filtersand filter conditions that may be used for automatic money management.FIGS. 11 and 13 displays an example graphical interface that may be usedto display money management filters and profit indicators. Then, FIGS.14 and 15 are example graphical interfaces that display potential lossdrop-off indicators that may be used to verify filter configurations andto assist a trader in making new trades and his/her trading strategy.However, it should be understood that the graphical representations ofprofit related information as well as filters and filter conditionsgiven below are only examples, and those skilled in the art willrecognize that modification or changes within the scope of the presentinvention may be made without departing from the spirit thereof. Also,it should be understood that the present invention is not limited to thenumber of filters or filter conditions presented in each figure, nor isit limited to the example layouts, and the money management interface aswell as profit indicators may be configured in a variety of differentways based on user preferences.

As will be illustrated in reference to the subsequent figures, agraphical interface may display to a trader a plurality of P/Lindicators that may assist a trader in making profitable trades as wellas allow a trader to view his current as well as potential P/L levels atany time during a trading day. More specifically, the P/L indicatorsinclude indicators corresponding to realized, net, and open P/L levels,the methods of calculating each of them will be described hereinafter.

The realized P/L level is based on a difference between the total sellprice and the total buy price associated with trader's trades related toa tradeable object. Therefore, the realized P/L level may be calculatedusing the following formula:Realized P/L=Sells−Buys   EQN (1)

In one embodiment, the Realized P/L is calculated when the trader's netposition is zero such as, for example, when a trader buys 30 lots firstand then sells 30 lots. Alternatively, the Realized P/L could bedetermined when a trader's net position crosses zero. In such anembodiment, for example, when a trader initially buys 30 lots at 100,and then sells 50 lots at 101, the Realized P/L may be determined basedon 30 buys at 100 and 30 sells at 101, leaving the net position of 20.Further, alternatively, the Realized P/L may be determined by mappingeach new fill to one of the quantities associated with the net position.For example, if the net position is 30, and a new fill of 2 associatedwith a sell order is detected, the quantity of 2 may be matched with oneof the buy order quantities that got filled to establish the netposition of 30, thus creating a new net position of 28. It should beunderstood that matching of the orders may be done in any manner. Forexample, if a trader entered a plurality of buy orders to establish theposition of 30, the sell order quantity may be matched with a buy orderquantity and price associated with the first buy order. Alternatively,the sell quantity may be matched with a buy order quantity and priceassociated with the last buy order that was entered to create the netposition of 30. Further, alternatively, an average buy price may becalculated for all buy orders, and the average price of all orders maybe used as a basis for determining the Realized P/L. It should beunderstood that a user could also define how and when the Realized P/Lis calculated. According to an example embodiment, the Realized P/Llevel may be dynamically updated based on market updates being receivedfrom one or more exchanges so that the Realized P/L level may be updatedevery time one of the conditions described above is detected.

Next, the net profit level may be determined when the trader's netposition is non-zero, such as when the trader holds a position on themarket. Therefore, the net profit level is determined based on thetrader's net position and the current market conditions, such as thelast traded price being received from the exchange. Preferably, the netposition is calculated based on the buy and sell orders that have beenfilled excluding working orders, which may be used for risk analysis, aswill be described below. It should be understood that when the trader'snet position or the last traded price changes, the net P/L level isdynamically recalculated to reflect each change.

The net profit level may be calculated using the following formula:Net P/L=(Sells−Buys)+(Net Position×Market Price)  EQN(2)Referring to EQN(2), the first factor “(Sells−Buys)” corresponds to thecost of every buy and sell that a trader has made, and the second factor“(Net Position×Market Price)” is an adjustment factor as if the traderwas to trade out of his open positions in the current market, such asbased on the last traded price corresponding to a predeterminedtradeable object. Therefore, using the net P/L, the trader can easilydetermine the profit or loss that the trader would incur if he/she wereto close the pending positions at the last traded price. Therefore,referring to the example given above of the 30 buys at 100, and then 50sells at 101, and using EQN(2), the Net P/L would be 30, i.e.,(5050−3000)+(−20×101)=2050−2020, which is 30. It should be understood,however, that other prices other than the last traded price could alsobe used to reflect the current market conditions. For example, a bid/askprice at the inside market could be used in place of the last tradedprice so that when a trader's net position is negative, the bid price atthe inside market is used, and when a trader's position is positive, theask price at the inside market is used instead. It should be understoodthat different or equivalent prices could also be used.

The Net P/L may be used as a factor in any other equations to calculatedifferent types of P/Ls. For example, the Open P/L could be calculatedby subtracting the Realized P/L from the Net P/L. The Open P/L level maybe calculated using the following formula:Open P/L=Net P/L−Realized P/L  EQN (3)Using the Open P/L, the trader can easily view the risk that the traderis taking by keeping his positions opened at the current market level.Referring to the example above, at the time when the trader initiallygets into the position of −20 by selling 50 contracts at 101 whilehaving the open position of 30 that he/she entered at 100, the Open P/Lis zero as there has been no market movement since the trader enteredinto the position of −20, i.e., sold 50 lots at 101. However, once themarket moves and reaches the last traded price of 100, for example, themarket move is favorable to the trader since the trader has the openposition of −20 that he entered by selling at 101. Therefore, the NetP/L is 50 [(5050−3000)+(−20×100)], and the Open P/L is 20 (50−30),indicating that the trader is making money in the current market, andwould realize the P/L of 50 if he were to close at the current marketlevel of 100, causing the Net P/L value to be added to the Realized P/L.It should be understood that the formulas in EQNs (1) and (2) are onlyexamples, and different formulas could also be used. For example, anymarket fees and transaction costs can be subtracted from the RealizedP/L in EQN (1).

FIG. 4 is a block diagram illustrating an example graphical interface400 for displaying P/L information related to a tradeable object beingtraded by a trader at one or more electronic exchanges.

As illustrated in FIG. 4, the interface 400 displays a number ofgraphical and numerical indicators corresponding to the Realized P/L andNet P/L levels. More specifically, graphical indicators 424 and 426correspond to the Realized and Net P/Ls, respectively, and the numericalindicators 404, 410 display actual values (120, 200) corresponding tothe two P/L levels. It should be understood that the distance betweenthe net and realized indicators corresponds to the Open P/L. Thus, inthe embodiment illustrated in FIG. 4, where the P/L scale (x-axis)increases to the left, the Open P/L is positive and indicates that thetrader is making money in the current market. It should be understoodthat the x-axis could also display values increasing from left to rightas well. More specifically, as illustrated in the indicator 416, theOpen P/L is 80. Additionally, the height of the Net P/L indicator maycorrespond to the trader's Net Position. In the embodiment illustratedin FIG. 4, the quantity scale, that in this and following examples isused to display the Net Position, is displayed on the y-axis of thegraphical indicator window, and the height of the indicator 426corresponds to the net position of 25. However, instead of displayingthe net position in relation to the quantity axis, a numerical valuecorresponding to the net position could be displayed in relation to theindicator 426.

It should be understood that the indicator 426 is preferably color-codedto distinguish a long (positive) position from a short (negative) netposition. For example, red and blue could be used where the redindicator would correspond to the short position, and the blue indicatorcorresponds to the long position. However, different colors could alsobe applied to the indicator. Additionally, it should be understood thatthe graphical display could be configured in any manner so that thevalues on the x-axis, for example, in this Figure as well as subsequentFigures could increase in a traditional manner to the right rather thanto the left. Further, the axis could be displayed in any manner as well,such as at angles that can be user configurable.

Additionally, as will be explained in greater detail below, eachgraphical profit indicator may be mapped to and displayed in one of aplurality of money management regions that correspond to a plurality ofmoney management filters. As mentioned in earlier paragraphs, a moneymanagement filter is defined using one or more filter criteria and isassociated with a set of parameters that control trader's trading.According to one example embodiment, a filter criterion corresponds to apredetermined profit range, and the controlling parameters may define amaximum order quantity that a trader may submit with any order, and amaximum net position that the trader may hold based on the trader'sprofit level. Further, it should be understood that a trader or a systemadministrator may configure which of the P/L levels controls selectionof the filters. Thus, for example, if a trader places an order that hasan order quantity higher than a maximum order quantity defined by thefilter associated with the trader's Net or Open P/L level, then, beforethe order is sent to the exchange, the order quantity is modified to thevalue associated with the maximum order quantity defined by the filter.It should be understood that the Net P/L level, Open P/L level, theRealized P/L level, or a combination thereof may determine the filterselection for the money management purposes, and the maximum orderquantity as well as the maximum net position may be determined using anequation defined for each filter so that more than one order quantitycan be associated with each filter.

Using the Open or Net P/L level as a filter criterion, the moneymanagement module may guard and limit trader's losses if the marketmoves in a direction that is not favorable to a trader. Then, the changein the trader's Open and Net P/Ls, which dynamically change based on themarket movement, may consequently move the trader to the lower/higherfilter associated with a higher/lower maximum order quantity and maximumnet position. Therefore, when the market moves against the trader'sposition, the trader will be allowed to trade lower order quantities ascompared to order quantities that a trader may trade if the market movesin a direction favorable to a trader. Additionally, when the marketmoves against the trader's position, the money management module mayprevent the trader from further increasing his net position bypreventing another order that would increase the trader's net positionfrom being sent to the exchange.

It should be understood that when a system administrator sets up anumber of money management filters for one or more traders, each tradermay also create his own set of filters. The trader-created filters maybe based on the same or different filter criteria and associated filterconditions as the filters created by the administrator. In such anembodiment, the money management module may apply two sets of filters toan incoming order, and if two or more applicable filters conflict, themost conservative filter condition may be selected to control the ordersbeing sent to the exchange. This embodiment may be especially usefulwhen a trader is willing to risk less than what he is allowed to basedon the filters that have been set up by the system administrator.

As mentioned in earlier paragraphs, the filter conditions may include amaximum order quantity and a maximum net position. Referring back toFIG. 4, according to one example embodiment, in addition to displayingP/L graphical indicators, the graphical interface 400 may also displayfilter conditions determined for each P/L level. As shown in FIG. 4, thetrader's Realized P/L 404 corresponds to a money management filterassociated with a maximum order quantity 406 of 24 and a maximum netposition 408 of 40. Further, as shown in FIG. 4, the Net P/L 410corresponds to a different money management filter associated with amaximum order quantity 412 of 44 and a maximum net position 414 of 88.Then, the Open P/L 416 is associated with the filter conditionsincluding a maximum order quantity 418 of 30, and a maximum net position420 of 50.

The graphical interface 400 may also display numerical profit levelsincluding the trader's maximum, minimum, and current realized profitlevels of 414, −249, and 120, as shown at 422. It should be understoodthat the P/L levels do not necessarily have to reflect the P/L levelsdetermined for the entire trading day interval. Alternatively, a tradermay select a shorter time interval, such as the last hour, for which themaximum, minimum, and current realized P/L levels may be determined, andthe values of which may be dynamically displayed via the graphicalinterface. Additionally, it should be understood that the graphicalinterface 400 may also display numerical values for maximum, minimum,and current profit levels related to other P/L levels, such as the NetP/L and/or Open P/L levels.

According to an example embodiment, positions of profit indicators onthe graphical interface may be dynamically updated every time a new P/Llevel is recalculated based on market condition changes, such as lasttraded price changes, or based on changes in the trader's net position.Preferably, the re-calculation is done dynamically based on informationbeing provided from the exchange, and every time a new net position orlast traded price is detected, the P/L levels are recalculated. Once theP/Ls are recalculated, the respective P/L indicators, the Net and OpenP/L indicators in this example, may be repositioned to the new level toreflect the change. Similar updates may occur when a changed in thetrader's net position is detected.

It should be understood that the example embodiments for displayingtrader's profit related information are not limited to the displayillustrated in FIG. 4. For example, if a trader simultaneously trades aplurality of tradeable objects, the graphical interface could be dividedinto a plurality of windows or areas, and each window may displaygraphical and/or numerical profit level indicators associated with oneof the plurality of tradeable objects being traded by the trader.

Further, in addition to calculating P/L levels for each tradeableobject, the P/L levels could be determined for all or a selected groupof tradeable objects being traded by the trader at one or moreexchanges. In such an embodiment, the trader may view, in addition to orinstead of P/L levels determined for a specific tradeable object,his/her overall and dynamically updated P/L levels. However, if thetradeable objects are being traded at different denominations, the moneymanagement module or the trading application may convert the P/L levelscorresponding to each tradeable object to the common tick or currencyvalue that is then used to calculate a cumulative P/L level. Further,alternatively, once a trader or a system administrator selects which ofthe P/L levels controls the money management filter selection, thegraphical interface may display only filter conditions, e.g., themaximum order quantity and the maximum net position, corresponding tothat filter.

Alternatively, instead of displaying indicators associated with P/Llevels determined throughout the trading day, a trader could insteadreset P/L levels to a zero level at any time during a trading day. Insuch an embodiment, the displayed P/L level is based on a P/L calculatedfrom the zero level starting from the time when a resetting input wasdetected. The resetting input may be received via many means including,for example, any graphical selection input, or any key-combinationinput. In one example embodiment, once the reset input is detected, onlythe reset P/Ls are displayed, and a trader may switch back to thecumulative P/L by selecting the same resetting selection input.Alternatively, when the trader selects the reset input, the cumulativeand reset P/L values may be displayed using different indicators.Further, as will be described below, since the P/L values control thefilter selection, once the P/L is reset, the most conservative filtermay control the trader's trading since the trader starts trading fromthe zero P/L level. Alternatively, the cumulative P/L may still controlfilter selection, while the graphical interface displays the reset P/Llevels. Further, a trader may select which of the P/L levels is reset.For example, a trader may reset only the Realized P/L or only a Net P/L.

It should be understood that the graphical indicators that are used todisplay P/L levels are not limited to any specific format, and theindicators could have any format and could be user-configurable. Forexample, the open, realized, and net P/L indicators may be distinguishedusing different colors or different indicator types. The indicatorscould also be displayed in any manner, such as horizontally, vertically,or at any angle, and in association with any trader-related ormarket-related information.

In addition to displaying profit level indicators, the graphical userinterface 400 could also be used for sending orders to one or moreelectronic exchange. For example, the net P/L indicator 426 may beassociated with an order-sending component for receiving a command tosend an order to an electronic exchange as a result of a selection of anarea in relation to the indicator 426 and detecting a predetermined keycombination input. Alternatively, a graphical selection order inputindicator could be displayed in relation to the indicators via thegraphical user interface 400 so that once the graphical selection orderinput indicator is enabled, a trader may simply select an area inrelation to the indicator 426 to send the order to the exchange. In apreferred embodiment, an order may be sent to the exchange uponselecting the indicator 426, and an order quantity may be based on atrader's net position and may be set to a quantity lower than, higherthan, or equal to the trader's net position. Then, the price of theorder may be determined based on a current net P/L, so that the price ofthe order may be based on a current market level. Alternatively, anotherP/L level in association with the indicator 426 may be selected, and theprice of the order may be determined based on the selected P/L level andbased on the price level associated with orders associated with the netposition level.

In addition to displaying current Open and Net P/L levels, the graphicalinterface may also display one or more profit levels that are based onpotential future market movements. For example, the graphical interfacemay display profit levels that are based on potential market movementswhen the market goes against the trader's position, thus, providing to atrader a graphical representation of potential risk.

FIG. 5 is a block diagram illustrating a graphical interface 500 fordisplaying a plurality of profit level indicators including theindicators associated with working orders that a trader may place on themarket to completely trade-out of his net position.

The graphical interface 500 displays profit related indicatorsdetermined for the tradeable object XS 502, and includes a realizedprofit indicator 504 at the P/L of 110, a net profit indicator 506 atthe P/L of 220, and two additional profit indicators 508 and 510determined based on two working orders that a trader has placed in themarket to offset his current net position of −50. For example, theindicator 508 may be associated with a working buy order having apredetermined order quantity equal to the current net position, placedat the price level of (LTP−X), where X corresponds to a number of ticksaway from the current LTP. Thus, the profit level associated with theindicator 508 illustrates a Realized PAL if the working order getsfilled. Then, the indicator 510 may correspond to a stop/limit orderthat a trader has placed on the market at a price level higher than thelast traded price (LTP+X) to minimize his losses in case his workingorder associated with the indicator 508 does not get filled and themarket moves against his position.

It should be understood that the method of calculating the profit levelcorresponding to the stop working order may vary based on systemconfigurations that are used for placing the stop orders. For example,“X” may correspond to the price that triggers placement of the order onthe market, and then the price where the actual order is placed on themarket may vary based on the order configuration. For example, once atrigger price (stop price) is detected, the order may turn into anotherorder, the type of which may depend on the trader's configuration. Forexample, the actual order may be a limit order configured at a limitprice that may be set to the stop price plus/minus an offset. The offsetparameter may be statically set by a trader, or may be dynamicallydetermined based on how fast the market moves, and in what direction themarket moves at the time when the trigger price is detected. Forexample, a positive or negative offset may be added to X to increase thechances of the order getting filled. If such an offset is used, themoney management module or the trading application may consider theoffset in calculating the profit level associated with the workingorder. Alternatively, an offset of zero could be used so that when themarket reaches the stop price, the order is placed at the stop price.Those skilled in the art will realize that many different variations arepossible as well. For example, instead of placing a limit order, amarket order could be used instead so that once the stop price isdetected, the order is placed at the market price so that in the fastmoving market, the price at which the order is placed on the market maybe a few ticks away from the stop price. In an embodiment when the orderis defined as a market order, the working order indicator may displaythe profit level as if the order was to get filled at the stop pricerather than any other price.

FIG. 6 is a block diagram illustrating a graphical interface 600 fordisplaying Net P/L levels for a plurality of working orders that atrader may enter to get out of the trader's position.

In FIG. 6, let's assume that a trader's buy order having an orderquantity of 30 gets filled at the price of 100 so that the trader's netposition is now 30. Let's then assume that before or after the firstorder gets filled, the trader places four sell orders to offset hiscurrent net position of 30. For example, the four sell orders include afirst order having an order quantity of 20 at the price of 101 (20@101),a second order of 3@102, a third order of 5@103, and a fourth order of2@104.

Referring to FIG. 6, the x-axis corresponds to the total P/L associatedwith working orders, and the y-axis corresponds to the quantity.Additionally, each working order is depicted using an indicator, thelength of which corresponds to the order quantity of each working order.Also, according to an example embodiment, since the working orders areentered to offset the net position, the first working order is displayedat the quantity level corresponding to the net position. For example,even if only one working order has the order quantity lower than the netposition, the top of such a working order indicator will be displayed atthe level of the net position, and the length of the indicator willcorrespond to the working order quantity. Therefore, for example, anindicator 602 corresponds to the first working order, where the top ofthe indicator is displayed at the level of the net position of 30, andthe length of the indicator corresponds to the quantity associated withthe first order.

Additionally, each working order indicator is displayed in relation tothe P/L level. The indicator 602 is plotted at the P/L level of 30 sincethe first working order corresponds to a price that is one tick higherthan the originally filled order, and one tick movement based on thetotal working order quantity of 30 corresponds to the profit tickmovement of 30. Then, assuming that the first working order gets filled,the total working order quantity would decrease to 10, and each one tickP/L movement would cause the P/L to move by 10 ticks, respectively.Therefore, the indicator 604 corresponding to the second order isplotted at the total quantity level of 10 and the P/L of 40, where thelength of the indictor corresponds to the order quantity of 3. Theindicators 606 and 608 are plotted using the same method and correspondto the third, and fourth orders. Therefore, if all working orders wereto get filled, the trader would realize the P/L of 49.

In the embodiment illustrated in FIG. 6, the order in which theindicators are illustrated corresponds to their prices since if themarket sweeps through the working orders, the first order will getfilled before the second order, and the second order will get filledbefore the third order, etc. It should be understood, however, that ifthe order quantity corresponding to the working orders is higher thanthe filled quantity of 30, in this example, the remaining quantityrepresents the start of the next net position and may be graphicallydisplayed in relation to the fourth working order indicator 610. Forexample, a graphical indicator with a number corresponding to theremaining working quantity could be displayed.

Additionally, it should be understood that a trader could modify,delete, or add working orders using the graphical interface 600. Eachworking order may be associated with an order sending component such asthe one described in relation to the net P/L indicator in FIG. 4. Forexample, a trader could modify a working order quantity of each workingorder by simply clicking on each working order indicator. In such anembodiment, a selection of the indicator may enable a display of awindow, via which a trader can change the order quantity and the orderprice. Alternatively, a trader could simply drag the length of theindicator to modify the quantity associated with the order and also dragthe indicator to a desired P/L level location. A trader could alsodelete a working order by simply selecting the working order indicatorand then entering a delete selection input, which may include agraphical identifier or any key combination input.

A trader could also enter new working orders using the methods describedin reference to FIG. 4, where instead of selecting an area in relationto the net P/L indicator, the trader could select the area in relationto one or more working orders. For example, referring to the examplegiven above, if a trader has a first working order having the orderquantity of 20 at 101, and the second order having the order quantity of10 at 103, a trader may input another working order between the twoorders by entering a predetermined selection input, such as entering apredetermined key combination, or a mouse input, and then inputting anorder quantity via a pop-up window. It should be understood that oncethe order is entered, the P/L level at which the order is entered may beused to determine a price level at which to enter the order. The pricecould be determined by reversing the method that was used to determineP/L levels for the working orders. Therefore, the price level for aworking order may be determined relative to the price of the filledorder, i.e., 100 in this example.

In one embodiment, once a new working order is entered, and the totalworking order quantity is higher than the quantity associated with theoriginal fill, i.e., 30 in this example, the order quantity of theoriginal second order may be modified to 5 so that the sum of thequantities is still equal to 30. Alternatively, the order quantity ofthe original second order may remain the same, so that when all workingorders are filled, the trader will end up with a net position of −5,since the working order is this examples are sell working orders.Therefore, a trader may input working orders when a fill quantity isdetected for another order so that the working orders are used to exitthe net position.

Additionally, a working order trade-out mechanism may be provided sothat when a predetermined selection input is detected, and then a traderselects one of the working order indicators, for example, the orderquantity corresponding to that order could change to a quantity that isrequired to get out of the net position. The predetermined selectioninput can correspond to a graphical indicator, a key combination input,or any other input means. For example, if the trader enables theautomatic working order trade-out, the trader can select the indicator604, which would then cause the working order quantity of 3 to bechanged to the working order quantity of 10. The working order trade-outmechanism may then cause the third and fourth orders to be deleted.Alternatively, the third and fourth order may remain on the market, butthe fill of the orders would result in a non-zero net position.

The working order indicators could be also displayed in combination withthe Net P/L indicator and the Realized P/L indicator. FIG. 7 illustratesone example embodiment for displaying a plurality of working orderindicators in combination with a Net P/L indicator and a Realized P/Lindicator.

The graphical interface 700 displays a Realized P/L indicator 702, a NetP/L indicator 704 that is based on a market price and the net positionthat a trader is holding, so that the indicator 704 moves based on themarket movements. The graphical interface also includes a plurality ofworking order indicators 706, 708, 710, and 712. Therefore, when themarket moves to the price level associated with the first working order706, and the order gets filled, the Net P/L indicator will move to theP/L level corresponding to the first order 706. Additionally, since thenet position will be decreased as the result of the fill, the length ofthe Net P/L indicator will decrease as well. An example, Net P/Lindicator 714 is displayed to illustrate such an embodiment. It shouldbe understood that if the market moves to price levels associated withother working orders, the Net P/L indicator will move to the P/Lpositions associated with the orders, and the length of the Net P/Lindicator will decrease respectively. Therefore, once all working ordersget filled, and if the working order quantity is equal to the netposition, the Realized P/L indicator 702 will move to the P/L levelcorresponding to the working order indicator 712.

FIG. 8 is a block diagram illustrating a graphical interface 800 fordisplaying a plurality of net profit levels based on potential marketmovements. More specifically, the graphical interface displays a Net P/Llevel indicator 802 associated with a Net P/L level of 390 and a Netposition (“NP”) of 50. The graphical display interface 800 displays anumber of graphical indicators associated with a plurality of potentialP/L levels that may result when the market moves against the trader'sposition, e.g., as if the trader were to get out of or close hisposition at that point in time. As shown in FIG. 8, three potentialprofit levels 804, 806, and 808 are illustrated based on the marketdropping by 1, 2, and 3 ticks from the current market level,respectively. Using the potential profit indicators 804, 806, and 808,the trader can easily view potential profit levels such as if the marketwas to move against the trader's position. Thus, for example, if themarket moves 1 tick against the trader's position, the trader's netprofit, as shown at 804, will decrease to 340 (390−current Net P/L minus50−net position multiplied by 1 tick). Similarly, as shown at 806 and808, if the market moves 2 and 3 ticks down from the current marketlevel, the trader's net profit will decrease to 290 and 240,respectively.

It should be understood that the potential net P/L indicators may bebased on the trader's average loss. In such an embodiment, the moneymanagement module may determine a trader's average loss during a tradingday based on an average number of ticks that a trader tends to lose onlosing trades. For example, the money management module may dynamicallyupdate the trader's average loss during a trading day based on thetrader's performance. Alternatively, the trader's average loss maycorrespond to a specific time interval such as the last hour of thetrader's trading. It should be understood that a trader or systemadministrator may specify how and based on what time interval theaverage loss is calculated. Then, the trader's average loss may be usedto determine another set of potential Net P/L indicators. It should beunderstood that many different embodiments are possible as well. Forexample, all potential net P/L loss indicators displayed via theinterface 800 may be based on the trader's average loss rather than thefixed tick loss. For example, the indicator 806 could correspond to apotential Net P/L determined based on the trader's average loss, theindicator 804 may correspond to Net P/L determined based on one half ofthe trader's average loss, and the indicator 806 may correspond to NetP/L determined based on twice the trader's average loss.

The average loss, similarly to the realized P/L level, may be computedwhen the trader's net position reaches or crosses the zero level. Itshould be understood that different indicators associated with thetrader's loss information can be displayed as well. For example, themoney management module or the trading application could compute apercentage of losing orders (e.g., orders that resulted in the loss ofprofit), and the average cost of each loss, the values of which could bedisplayed via the graphical interface 800. Further, as will be describedin greater detail below, trader's average loss could also be used as oneof the factors in determining when the trader is moved to the lowermoney management filter.

As mentioned in earlier paragraphs, the open, net, and realized P/Llevel indicators may be displayed in combination with the graphicaldisplay of money management filters so that the trader not only can viewhis profit levels but also can quickly and clearly view any tradingconstraints (controlling parameters) that he/she might have to use ifthe market moves in or against his/her position. According to oneexample embodiment, a money management filter may be defined using oneor more filter criteria and filter conditions. For example, filtercriteria may include one or more of the following criteria: Open P/L,Realized P/L, Net P/L, trader's net position, available credit, a numberof transactions, a transaction/fill ratio, a change in net position, ora type of tradeable object, and any other trader-related ormarket-related data. Further, as mentioned in earlier paragraphs, itshould be understood that the P/L levels associated with filter criteriamay be calculated for a specific tradeable object or a combination oftradeable objects being traded by a trader.

FIG. 9 is a block diagram illustrating an example money managementinterface 900 that a trader or a system administrator may use to definefilter criteria and filter conditions.

According to one embodiment, a trader or a system administrator maydefine via a profile name window 902 a filter profile that may include acombination of filters. The filters in the filter profile may be basedon different filter criteria, however, if two or more filters areapplicable to the incoming order, and their filter conditions conflict,the most conservative filter condition will preferably be used.Alternatively, a filter may be configured so that only filter conditionsassociated with the filter will control order parameters even if anotherfilter associated with a different set of filter conditions applies.Further, the profile may be created for a predetermined tradeable objector a group of tradeable objects being traded by the trader, and thetrader may select one or more tradeable object to be associated with theprofile using a tradeable object pull down menu 904. In the embodimentillustrated in FIG. 9, the filter criteria 906 are based on the Open P/Llevel, and each filter is associated with a P/L threshold level 908 thatthen maps to a number of filter conditions including a maximum orderquantity 912 and a maximum net position 914. However, it should beunderstood that the filter criteria may be based on the Net P/L level ora combination of different P/L levels. In addition to each P/L thresholdlevel, a trader may also define one or more retraction levels that areconfigured to limit trader's losses once a trader reaches apredetermined profit level. It should be understood that the profitlevels and retraction levels may be defined using many methods. Forexample, the profit levels and retraction levels may be defined in ticksor currency, and the retraction levels could also be defined as apercentage of the maximum P/L.

Referring to the example in FIG. 9, when a trader reaches the Open P/Llevel of 10, the trader may trade the maximum order quantity of 5 andmay hold the maximum net position of 10. As mentioned earlier, the netposition may be determined using different methods, and a trader orsystem administrator may define which orders are taken intoconsideration to calculate the net position. As shown in FIG. 9, oncethe trader's open P/L reaches the value of 10 and then falls to thelevel of 7, as shown in the retraction level column 910, the trader'sability to trade is limited to the order quantities of 3 and the maximumnet position of 6. Referring to the next retraction level under the sameOpen P/L threshold level, when the trader's Open P/L reaches the levelof 5, the trader is limited to trade order quantities of 3 to trade downto the position of 0.

Once a trader creates a filter profile, the trader may save the profileby simply selecting a save selection input 916. Alternatively, thetrader may quickly delete the profile by selecting a delete selectioninput 918. Further, alternatively, the trader may quickly exit the moneymanagement setup interface 900 by selecting a cancel selection input920. Once the filter profile is saved, the trader may easily retrieveand edit the profile's filter criteria and conditions by selecting theprofile's name using the pull down profile menu 902. In one embodiment,when a system administrator configures money management filters for agroup of traders, the system administrator may set up authorizationrules defining one or more traders or system administrators who cancreate, edit, enable, disable, or reset limits created for the group oftraders.

Filter selection may be modified based on the trader's performance suchas a percentage of losing trades, or average cost of all losses incurredby a trader during a trading day. In one example embodiment, in additionto selecting a specific filter for a trader based on a trader's P/Llevel and other parameters described above, the money management modulemay monitor a number of losing trades associated with the trader whenthe trader is being controlled by a predetermined filter and then usethat number as a filter selection overriding mechanism. For example, atrader may configure a number of losing trades that a trader may incurwhile being controlled by a specific filter. In such an embodiment, if atrader's P/L level drops to a level that should enable a morerestricting filter, and the number of trader's losing trades while thetrader's was controlled by the higher filter was lower than theconfigured value, then, the less restricting filter may still controlthe trader's trading until another losing trade is detected, forexample. In one embodiment, a number of losing trades that would allow atrader to remain under the control of the less restricting filter couldbe user configurable.

It should be understood that other filters could also be used, andadditional filters have been described in greater detail in U.S. patentapplication Ser. No. 10/355,471, filed on Jan. 31, 2003, entitled“System and Method for Money Management in Electronic TradingEnvironment,” the contents of which are fully incorporated herein byreference.

Once a trader defines one or more money management filters, the tradermay view the trader-related data as well as any filter conditions beingcurrently imposed on each tradeable object via another graphicalinterface. FIG. 10 is a block diagram illustrating a monitoringinterface that allows a trader to view market conditions and limitationsimposed on each tradeable object or a group of the tradeable objectsassociated with the created filters. As shown in FIG. 10, the moneymanagement monitoring interface 1000 displays a name of each profile1002, a name or names of tradeable object(s) 1004 associated with eachprofile, “limits on” indicators 1006 that may be used to enable filtersfor the specific tradeable object, a quantity associated with workingorders 1008, a trader's net position 1010, a maximum P/L 1012 and aminimum P/L 1014 determined for a trader during a trading day, a currentP/L 1016, as well as effective current limits 1018 including a maximumnet position and a maximum order quantity that are currently imposed ona trader based on the trader's current P/L level. It should beunderstood that when a profile is created for more than one tradeableobject being traded by a trader, the current P/L 1016 may display theP/L level associated with each tradeable object as well as the combinedP/L level associated with all or some tradeable objects in the profile.It should be understood that the current P/L 1016 can be associated withany P/L specified by the trader such as an Open, Realized, Net P/Llevel, or the combination thereof It should be understood that a tradermay add or delete columns in the money management interface 1000 andspecify which of the described or additional parameters are to bedisplayed via the interface.

According to an example embodiment, trader's profit related informationas well as filter related information may be displayed to a trader via asingle graphical interface. FIG. 11 is a block diagram illustrating agraphical interface 1100 that displays trader related P/L information incombination with money management filter related data. The graphicalinterface 1100 displays a number of filter triggers 1126 associated witha plurality of P/L trigger levels that, in this example, are associatedwith Net P/L trigger levels. According to an example embodiment, eachP/L trigger level maps to one or more filters defining a maximum orderquantity and a maximum net position. More specifically, and asillustrated in FIG. 11, when a trader's Net P/L reaches one of the P/Ltriggers 1126, the trigger corresponding to the trader's Net P/L levelmay be highlighted so that the trader can easily tell which filter levelor filter band is used to currently control the trader's trades.

When the trader reaches one of the predetermined P/L level correspondingto the triggers 1126, the graphical interface 1100 may display via amoney management filter region 1104 one or more filters corresponding tothat P/L trigger. As illustrated in FIG. 11, the P/L trigger level of300 corresponds to four filters including the main filter 1128, andthree loss-limiting filters 1130, 1132, and 1134. The main filter 1128controls the orders being sent by a trader to an exchange when thetrader's open P/L level is between 300 and 450 profit levels. Morespecifically, the filter 1128 limits the order quantity that a tradermay submit to the exchange to the maximum order quantity of 44, andfurther limits the trader's net position to the maximum net position of88. However, if the trader's profit level does not reach the higherprofit trigger, e.g., 450 in this example, and instead drops to theprofit level lower than 300, then one of the loss-limiting filterscorresponding to the Net P/L trigger level of 300 controls the trader'sorders. For example, if the trader's Net P/L drops to a profit levelbetween the 200 and 300 profit range, filter conditions associated withthe filter 1130, e.g., a maximum order quantity of 31 and a net positionof 62, may control the orders being sent by the trader. Similarly, whenthe trader's profit is in the profit range of 200 and 150, filterconditions associated with the filter 1132, including a maximum orderquantity of 24 and a maximum net position of 48, control the trader'sorders being sent to the exchange. Finally, when the trader's profitlevel reaches the profit level below 150, the trader is limited to theorder quantity of 16 and a net position of 0 so that a trader is forcedto trade out rather than to submit orders that increase the trader's netposition.

It should be understood that once a trader is in a predetermined filterband, such as the one shown in FIG. 11, the trader's trading iscontrolled by the filter conditions of that band. In the exampleembodiment of FIG. 11, once a trader reaches the P/L of 450, filters1128, 1130, 1132, and 1134 associated with the filter trigger of 450 maycontrol the trader's trading. Similarly, once the trader's P/L drops tothe P/L level of 180, the trader's trading will be controlled by thefilter conditions associated with the filter 1132 rather than some otherfilter that is associated with a different band and having the same P/Llevel as one of its filter criteria.

Additionally, it should be understood that the present invention is notlimited to the graphical interface described in reference to FIG. 11.Alternatively, instead of displaying a plurality of filters within themoney management region 1104, the money management region 1104 may becolor-coded so that, for example, different colors or different shadesof the same color correspond to different sets of money managementparameters, such as different maximum order quantities and maximum netpositions. Different embodiments are possible as well.

According to one embodiment, in addition to selecting applicable filtersbased on the profit levels, other methods may be provided to a trader tofurther control filter selection. One example method is a permanentpullback that prevents the trader from advancing to a higher filter oncethe trader drops to the lower one. To illustrate the permanent pullbackoption, lets assume that the trader's trades are being initiallycontrolled by the filter 1130, and then the trader starts losing moneyand drops down to the lower filter such as the filter 1132. With thepermanent pullback enabled, even when the trader advances back to theprofit level associated with the filter 1130, the trader is stilllimited by the filter conditions associated with the filter 1132.

In one embodiment, even with the permanent pullback enabled, a tradermay be able to advance to a higher filter only when the trader gets to aprofit level that advances the trader to another filter band, such asP/L of 450 in FIG. 11. It should be understood that two indicatorsassociated with the permanent pullback option and the band advanceoption may be displayed to a trader when the filter configures filterparameters via a filter configuration window. However, it should beunderstood that a trader may enable the permanent pullback at any timeduring trading as well. Additionally, it should be understood that thepermanent pullback could be disabled at other times of the trader'strading, such as when the trader advances a predetermined number offilters within the filter band.

In addition to displaying a number of money management filters, themoney management region 1104 also displays profit indicators that aredynamically updated during a trading day to reflect current profitlevels associated with the trader. It should be understood that a tradermay select which of the profit indicators are displayed via the moneymanagement filter region 1104. FIG. 11 illustrates two P/L indicatorsincluding a Net P/L indicator 1124 and a Realized P/L indicator 1122that are dynamically updated throughout the trading day upon detecting achange in the corresponding profit levels. As shown in FIG. 11, theRealized P/L is at 175, and the Net P/L is at 400. It should beunderstood that a trader may configure graphical representation of eachprofit indicator, such as the shape or color of each indicator, so thatthe trader can easily distinguish between the two or more indicators.

Also as shown in FIG. 11, the profit indicators correspond to apredetermined tradeable object, here the tradeable object XS 1102.However, alternatively, additional profit indicators could be displayedvia the money management region 1104, such as overall profit indicatorsdetermined based on P/L levels associated with all or some tradeableobjects being traded by the trader. Further, as explained in referenceto FIGS. 6 and 7, the money management filter region 1104 could alsodisplay a plurality of P/L indicators determined based on working ordersthat a trader has on the market. It should be understood that if atrader has a large number of working orders on the market, the potentialprofit levels associated with those orders may be combined and displayedusing a single P/L indicator.

The graphical interface 1100, in addition to the graphical indicators,may also display a number of numerical indicators. As illustrated inFIG. 11, the indicators include a working buy order indicator 1106 thatdisplays a working buy quantity of 20, a working sell order indicator1108 that displays a working sell quantity of 0, and a trader's netposition 1110 that displays a trader's net position of −20. In additionto displaying P/L levels using graphical indicators, the P/L levels maybe displayed using numerical P/L indicators 1112. The P/L indicators1112 correspond to the Net P/L levels and include the maximum Net P/Llevel of 414 that the trader has held during the trading day, theminimum Net P/L level of −249, and the current Net P/L level of 400. Itshould be understood that the profit levels may be distinguished usingdifferent colors or graphical indicators.

It should be understood that the graphical interface could also displaynumerical indictors related to other types of P/Ls such as Realizedand/or Open P/L levels. As illustrated in FIG. 11, at 1114 and 1116,instead of defining one maximum order quantity, each filter may beassociated with different maximum order quantities depending on whethera trader submits a buy or sell order. The graphical interface 1100 mayalso display numerical indicators 1118 and 1120 associated with themaximum order quantity and the maximum position that a trader may holdbased on the trader's current profit level. In FIG. 11, numerical valuesfor the indicators 1118 and 1120 are determined based on the trader'snet P/L level associated with the tradeable object XS 1102. However, itshould be understood that the values may be determined based on anyuser-configurable profit level associated with one or more tradeableobjects being traded by one or more traders.

A trader may also use the money management filter region 1104 for filterconfiguration purposes. For example, when the graphical interface 1100is opened for the first time, the money management filter region 1104can display a plurality of default filter/money management regions suchas the regions 1128, 1130, 1132, and 1134. Then, a trader may click oneach of the regions to configure the maximum order quantity, the maximumnet position, and the profit range for each of the regions. In oneembodiment, a trader may simply change default values being displayed inassociation with each filter to desired values. Alternatively, a tradermay click on the filter region, and a pop-up window could be displayedvia which a trader may enter filter criteria and conditions for one ormore filters. In another embodiment, a trader may configure the filtersusing a configuration interface such as the one illustrated in FIG. 9,for example, and once the configuration is finished, the configuredfilters may be displayed via the money management filter region 1104.Alternatively, a trader may simply drag the boundaries of each filterregion to desired locations corresponding to a predetermined profitrange, as well as a maximum order quantity and a maximum net position.

Alternatively, a configuration selection input may be displayed on thegraphical interface 1100 that, when selected, may invoke another windowvia which the trader can configure a number of filters for each of thetrigger levels. FIG. 12 is a block diagram illustrating an examplegraphical interface 1200 via which a trader can configure a plurality offilters for each of the P/L trigger levels. The graphical interface 1200may be invoked when the trader specifies P/L trigger levels via thegraphical interface 1200 and then selects a configuration selectioninput to configure a plurality of money management filters for each ofthe levels, for example. The graphical interface 1200 displays onlythree P/L trigger levels; however, it should be understood that a tradercould specify more or fewer trigger levels. Each profit level may bedisplayed in association with a plurality of default filter regions1202, 1214, and 1224, and a trader may configure numerical values foreach filter criteria and filter conditions by simply modifying defaultvalues being displayed in association with each filter to the desiredvalues, or by dragging the edges of each filter to the desired profit,quantity and net position levels.

FIG. 12 illustrates three profit trigger levels including P/L triggerlevels of 150, 300, and 450, respectively. Each of these P/L triggerlevels is then associated with a plurality of filters, so that, forexample, the P/L trigger 450 is associated with five filters 1204, 1206,1208, 1210, and 1212, and the P/L triggers 300 and 150 are associatedwith four filters each, 1216, 1218, 1220, and 1222 for the P/L trigger300, and filters 1226, 1228, 1230, and 1232 for the P/L trigger 150.However, it should be understood that more or fewer filters could beconfigured for each P/L trigger level. For example, a trader may simplyselect an add selection input 1234, 1240, or 1246 being displayed in oneof the P/L trigger regions to add another filter to that P/L triggerlevel. Similarly, a trader may delete one or more default filters byfirst selecting a default filter block in the P/L trigger region 450,and then selecting a delete selection input corresponding to thatregion, such as one of the delete selection inputs 1236, 1242, and 1248.Once a trader configures all filters for a P/L trigger, the trader canthen save the filters by simply selecting a corresponding save selectioninput such as one of the save selection inputs 1238, 1244, or 1250,respectively, depending on which P/L trigger level the filterscorrespond to.

The money management filters are not limited to the filters describedabove, and more or fewer filters could be created for a tradeableobject. Some of the additional filters may be time-based so that theyare triggered at specific time periods. In addition to time being atrigger, the time-based filters may also have other triggers, such astriggers related-to trader data, exchange data, or data from outsidesources. For example, a set of time-based filters may be created tocomplement any other filter conditions when a predetermined time periodis detected. In such an embodiment, when two or more filter conditionsconflict, the more conservative one will control. For example, atime-based filter, such as a filter effective between 8 a.m. and 9 a.m.,may be triggered upon receiving an employment number. Once theemployment number is detected, the filter may prevent the trader fromtrading or limit the trader to trading very small order quantities. Inone embodiment, time-based filters may be configured to completelyoverwrite any other filter conditions for the time period associatedwith the time-based filter. It should be understood that differentoutside triggers could also be used in addition to the employmentnumbers. For example, during the last twenty minutes of trading beforethe market closes, any filters that are applied to trader's orders maybe overridden or supplement by filter conditions of another set offilters created for the market closing time period. Such filters may bedesigned so that the trader completely trades out of his positions.

In one embodiment, a graphical interface, in addition to the applicablefilter band and P/L indicators, could also display indicators associatedwith time-based filters. FIG. 13 is a block diagram illustrating agraphical interface 1300 for displaying a money management filter bandin combination with P/L indicators and time-based filter indicators. Thegraphical interface 1300 includes a time-based filter region including aplurality of time-based filter indicators 1304, 1306, and 1308. Forexample, the first indicator 1304 may correspond to an employment numberfilter, the second indicator 1306 may correspond to one or more filtersthat are triggered based on some news event, and the third filter 1308may correspond to the market closing time-based filter.

It should be understood that each filter may be labeled with anindicator defining the type of the filter, and the time-based filtersmay overlap. When the time-based filters overlap, the most conservativeconditions may be control the order parameters. Alternatively, if thereis more than one filter that controls order parameters at any giventime, a trader or a system administrator may control which one of themwill be applied to orders being sent to the exchange. For example, eachfilter may be assigned a predetermined priority level so that when morethan one filter is applicable during a predetermined time period, onlyfilter conditions associated with filters having the same prioritylevels are merged. It should be understood that different methods fordetermining which filter conditions should apply at any given timeperiod could also be used, and the present embodiments are not limitedto labeling each filter with a priority level. Further, other filterscould be created to turn all filter restrictions off for a predeterminedtime period so that a trader can trade any order quantities and can holdany net position that the trader desires during the time period definedby the order.

It should be understood that time-based filters may be configured usingthe methods described above, and each time-based filter may beassociated with one or more filter bands including one or more filters.Additionally, once the time-based filter is triggered, the time-basedfilters may be displayed via the money management window so that thetrader may quickly and easily view the applicable filters. In oneembodiment, the time-based filter may be superimposed over any otherfilters displayed via the interface such as in the embodimentillustrated in FIG. 13, where the time-based filter 1310 is displayed incombination with other applicable filters. It should be understood thatdifferent configurations are possible as well, and a trader mayconfigure the interface so that only the most conservative of theapplicable filters is displayed via the interface, or when the filtersare superimposed, the overlay of the filters can be shaded so that thetrader can easily view a maximum order quantity and a maximum netposition for different profit ranges.

Once the filter conditions such as the maximum order quantity and themaximum net position are configured, a trader or a system administratormay verify the filter conditions by applying different drop off lossconditions to the created filter. FIG. 14 is a graphical interface 1400that may be used for verifying and changing filter conditions configuredby a trader or a system administrator using different potential profitloss conditions. The graphical interface 1400 includes a moneymanagement filter window that displays a plurality of money managementfilters 1404, 1406, 1408, and 1410 created for a trader or a group oftraders trading a tradeable object XS 1402. Once the filters aredisplayed, a trader or a system administrator may enable a display ofpotential profit indicators to verify if the filters have been set upaccording to his/her needs. For example, in FIG. 14, a plurality ofone-tick potential profit loss indicators 1412, 1416, 1418, and 1420 aredisplayed, and the slope of each indicator is determined based on asingle tick loss (a number of contracts * tick loss per contract) sothat, for example, referring to the first filter, a one tick-profit lossfor 50 contracts corresponds to 50 ticks of P/L loss, as shown on thex-axis. It should be understood that even though the slope correspondingto a one tick loss should be 1:1, the slope of the displayed potentialprofit loss indicators, as illustrated in FIG. 14, is not a 45-degreeline since the scales on the two axis corresponding to the quantity axisand the profit level axis are different.

Referring to FIG. 14, the indicator 1412 corresponds to a one tickprofit loss and may be used by a trader or system administrator todetermine if the set filter configurations are what the trader reallyanticipated. For example, based on the indicator, the trader may quicklydetermine that a loss of one tick at the net position of 50 will resultin the trader's dropping out of the first filter associated with themaximum net position of 50 and the maximum order quantity of 30. If thisis what a trader desires, the trader may leave the filter configurationunchanged. Alternatively, the trader may increase the profit rangecorresponding to the filter 1404 so that a higher loss is allowed beforeanother filter such as the filter 1406 controls the trader's trading.

The indicator 1412 could also be used to visually and quickly determinewhat would happen at other net positions levels. For example, as shownin FIG. 14, if the trader's Realized P/L level were at 500 and thetrader then trades so that his/her net position becomes 45, the tradercan easily determine that a loss of one tick (Δ1) would keep the traderin the same filter, however, a loss of two ticks (Δ2) would move thetrader to the second, more restricting, filter 1406, where the trader'smaximum order quantity and net position would be lowered to 20 and 40,respectively.

Similarly, referring to the filter 1406, the indicator 1416 alsocorresponds to one tick loss, and as shown in FIG. 14, if the trader'snet position were 15, the trader would be allowed to lose about 5 ticksbefore his trades would be controlled by less favorable filterconditions of the filter 1408. It should be understood that the profitloss indicators are not limited to the one tick loss indicators, and theindicators could be based on any number of ticks, such as 2, 3, 4, andcould be user-configurable. Alternatively, the money managementapplication or the trading application may determine an average tickloss associated with the trader's trades, and another indicatorassociated with the trader's average tick loss may be displayed inaddition to any other indicators. It should be understood that theindicators may be distinguished using different colors or differentindicator types that could be user-configurable.

In addition to verifying filter configurations during filter set up, theprofit loss indicators may be used to provide a trader with a quickindication of a potential risk before a trader enters into any position.According to one embodiment, a potential profit loss indicator may bedisplayed to a trader in relation to the Realized P/L indicator.Further, the indicator may be displayed when the money managementapplication detects that the trader's net position is equal to zero, sothat before the trader decides to enter any new orders, the trader canquickly view his/her potential risk based on different potential orderquantities.

FIG. 15 is a block diagram illustrating an interface 1500 that displayspotential profit loss indicators in relation to a trader's Realized P/Lindicator. The interface 1500 displays a money management window 1504including a plurality of money management filters 1506, 1508, 1510, and1512. Further, the money management interface 1500 displays a profitloss indicator 1514 in relation to the Realized P/L indicator 1516. Inone embodiment, the indicator 1514 may be displayed to a trader when thetrader's net position is flat so that before a trader enters any neworders, the trader can easily view his potential profit losses based onthe order quantity that the trader is planning to trade. Further, usingthe indicator 1514, the trader may easily predict his potential filterdrop, e.g., a filter that would control the trader's trades, if themarket goes against his position. It should be understood that inaddition to showing the potential profit loss indicators, such as theindicator 1514, the graphical interface 1500 could also displayindicators related to positive market movements, e.g., indicatorscorresponding to the potential profit gain rather than loss. In such anembodiment, for example, a one tick potential profit gain indicatorcould be displayed, where the indicator's slope would be negative,rather than positive as in the indicator 1514.

Referring to FIG. 15, the Realized P/L indicator corresponds to acurrent Realized P/L level of 460, and the profit loss indicator 1514may be used to determine where the trader's profit would be and whatfilter would control the trader's trading if the trader were to enterinto a position between 1 and 50 as defined by the first filter. Forexample, if a trader enters one or more orders so that a trader's netposition becomes 45, a trader is risking a drop to the third filter 1510and a loss of 90 ticks if the market were to move two ticks against thetrader's position. Further, for example, the trader can easily determinethat keeping the net position of 30 rather than 45 would result in amuch smaller risk and much smaller profit loss. First the loss of twoticks would cause the trader's trading to be controlled by the secondfilter 1508 rather than the third filter 1510, and the P/L loss that thetrader would incur would be much lower compared to the loss of two tickswhen the trader's position is 45. However, rather than viewing potentialP/L in terms of losses, a trader may view potential P/L in terms ofprofit gains so that the higher net position would result in much higherprofit gain compared to the lower potential net position. Therefore,another set of potential gain profit indicator could be displayed inaddition to potential loss indicators for a plurality of marketmovements.

In addition to the maximum order quantities and maximum net positionassociated with each filter, a trader or an administrator may create aplurality of trade-out exceptions to enable a trader to exit his openpositions. Such exceptions may be used when the market moves against thetrader's position causing the trader's orders to be controlled by afilter associated with a maximum net position that is significantlylower than the position being currently traded by the trader so that thetrader is forced to lower his position by selling or buying until hereaches the maximum net position, for example.

To illustrate one example trade-out mechanism, let's assume that at timeto, a trader is holding a net position of 40 and has no working orderson the market, and the money management filter that controls thetrader's orders based on the trader's current open P/L level, forexample, is associated with a maximum net position of 50, and a maximumorder quantity of 15. Then, let's assume that at time t1, the marketmoves against the trader position, causing the trader's orders to becontrolled by a different filter associated with a maximum net positionof 15, and a maximum order quantity of 7. However, because the trader'snet position of 40 is much higher than the maximum net position of 15associated with the current filter, the trader will not be able to sendorders to the market quickly enough to get out of his position in caseof unfavorable and fast market movements. In such an embodiment, a setof trade-out rules may be created to enable a trader to lower hisposition to the one specified by the controlling filter. Such overridingrules may be automatically enabled whenever a limit condition such asthe one explained above is detected. Alternatively, a user selectioninput may be displayed to a trader when such a condition is detected,and the trader may enable the trade-out mechanism by selecting sucha-selection input.

According to one example embodiment, a trade-down quantity may be firstcalculated to enable a trader to trade down to the maximum net positionassociated with the current filter. The trade-down quantity may becalculated by first subtracting the current trader's position from themaximum net position associated with the filter, and then taking theabsolute value of the result, which in the example presented above wouldbe |15−40|=25. Then, the trade-out quantity may be determined by takingthe maximum of the absolute value calculated above and the maximum orderquantity associated with the filter, which would be 25 in the aboveexample, i.e., max (25,7). Therefore, using such a mechanism, the tradercan submit a sell order of 25, which when filled, would cause thetrader's net position to reach the maximum net position of 15.

Another rule may be created if the trader wants to trade down to zerowhen the trader has the working order of 25 pending on the market. Onceagain a user selection input may be provided via the interface to enablethe trader to select such an option. The maximum trade-down to zeroquantity may be determined by taking the minimum of the working quantity(25 in this example) and a difference between the trader's net position(40) and the working quantity (25), thus, taking minimum (25,15) in thisexample, which is 15. It should be understood that different orequivalent trade-out mechanisms could also be used, and the presentinvention is not limited to the embodiment illustrated above. Further,for example, a set of rules may be created limiting price levels atwhich a trader can place the trade-out orders on the market.

It should be understood that the above description of the preferredembodiments, alternative embodiments, and specific examples, are givenby way of illustration and should not be viewed as limiting. Further,many changes and modifications within the scope of the presentembodiments may be made without departing from the spirit thereof, andthe present invention includes such changes and modifications. Forexample, the present invention is not limited to the filterconfigurations described hereinbefore, and those skilled in the art willunderstand that different configuration methods could also be used.

Further, it will be apparent to those of ordinary skill in the art thatmethods involved in the system and method for money management in anelectronic trading environment may be embodied in a computer programproduct that includes one or more computer readable media. For example,a computer readable medium can include a readable memory device, such asa hard drive device, CD-ROM, a DVD-ROM, or a computer diskette, havingcomputer readable program code segments stored thereon. The computerreadable medium can also include a communications or transmissionmedium, such as, a bus or a communication link, either optical, wired orwireless having program code segments carried thereon as digital oranalog data signals.

The claims should not be read as limited to the described order orelements unless stated to that effect. Therefore, all embodiments thatcome within the scope and spirit of the following claims and equivalentsthereto are claimed as the invention.

1. A method for money management in an electronic trading environment,the method comprising: receiving an order to be sent to an electronicexchange, wherein the order is associated with a tradeable object andhas order parameters comprising an order price and an order quantity;automatically electronically determining a trader's net profit/losslevel for the tradeable object based on a realized profit/loss and anopen profit/loss for the tradeable object, wherein the realizedprofit/loss represents a profit or loss based on a quantity sold at asell price and a quantity bought at a buy price, and wherein the openprofit/loss represents a possible profit or loss based on a current openposition and a difference between a price to get into the current openposition and a current price to close the open position based on thetrader's net profit/loss level, determining a money management filter tobe used to control order parameters associated with the order, whereinthe money management filter comprises a filter condition that representsa maximum order quantity for a given net profit/loss level; andautomatically electronically applying the money management filter havingthe filter condition to the order parameters before the order is sent tothe exchange; automatically electronically determining that the orderquantity is, greater than the maximum order quantity; responsivelyautomatically electronically modifying the order quantity based on themaximum order quantity; and electronically sending the order to theelectronic exchange, the order having order parameters that comprise theorder price and the adjusted order quantity.
 2. The method of claim 1,wherein the current price to close the open position comprises a lasttraded price.
 3. The method of claim 1, wherein the filter conditionfurther comprises a maximum open position.
 4. The method of claim 3,wherein applying the filter condition to the order before the order issent to the exchange comprises: determining the current open position;and if the current open position is higher than the maximum openposition associated with the money management filter, refraining fromsending the order to the electronic exchange.
 5. The method of claim 1,further comprising: defining a plurality of money management filters,each money management filter associated with a criterion comprising anet profit/loss level, wherein each filter is further associated with afilter condition comprising a maximum order quantity and a maximum netposition, and wherein the plurality of money management filters areapplied to the order before the order is sent to the exchange.
 6. Themethod of claim 1, further comprising: determining an overall netprofit/loss level based on trader's realized and open positionsassociated with a plurality of tradeable objects being traded by atrader and further based on current market levels associated with eachof the plurality of tradeable objects, wherein the overall netprofit/loss level is used to determine a filter condition to be used tocontrol the order parameters associated with the order.
 7. The method ofclaim 1, further comprising: determining a realized profit/loss level;and using the realized profit/loss level to determine the filtercondition to be used to control the order parameters associated with theorder.
 8. The method of claim 7, further comprising: applying a priorityrule to determine if the filter condition corresponding to the realizedprofit/loss level or the trader's net profit/loss level controls theorder parameters associated with the order.
 9. The method of claim 7,further comprising: determining which of the filter conditionscorresponding to the realized profit/loss level or the trader's netprofit/loss level is most restrictive, wherein the most restrictivefilter condition is one that allows the least order quantity; andapplying the most restrictive filter condition to control the orderquantity associated with the order.
 10. The method of claim 7, furthercomprising: determining an open profit/loss level; and using the openprofit/loss level to determine a money management filter to be used tocontrol the order parameters associated with the order.
 11. The methodof claim 10, further comprising: determining which of the filterconditions corresponding to the realized profit/loss level, the trader'snet profit/loss level, and the open profit/loss level is mostrestrictive, wherein the most restrictive filter condition is one thatallows the least order quantity; and applying the most restrictivefilter condition to control the order quantity associated with theorder.
 12. The method of claim 10, further comprising: applying apriority rule to determine if the filter condition corresponding to therealized profit/loss level, the trader's net profit/loss level, or theopen profit/loss level controls the order parameters associated with theorder.
 13. The method of claim 1, further comprising: defining aplurality of time-based money management filters, wherein eachtime-based money management filter is associated with a time-basedtrigger criteria and a filter condition for controlling the orderparameters; selecting one of the plurality of time-based moneymanagement filters based on time of day; and applying a filter conditionassociated with the selected time-based money management filter to theorder.
 14. The method of claim 1, further comprising: using data fromone or more outside sources to determine the money management filter tobe applied to the order.
 15. The method of claim 1, further comprising:using data from at least one exchange to determine the money managementfilter to be applied to the order.
 16. The method of claim 1, whereinthe current price to close the open position comprises a best bid priceor a best ask price.